Saturday, February 8, 2014

Warren Buffett is now working for me

I recently initiated a position in Berkshire Hathaway (BRK.B), which is the holding company of billionaire investor and philanthropist Warren Buffett. Over the past year, I have studied almost everything publicly available on Warren Buffett and how he accumulated his sizeable fortune. This included his early years where he was obsessed with numbers and businesses, his Buffett partnership years, and his latest investments at the helm of Berkshire Hathaway over the past 50 years.

The reason behind my purchase of Berkshire Hathaway is because I want to be able to go to the 2014 Berkshire Hathaway meeting of shareholders in May.There is a 50/50 chance that I will be able to attend the meeting. I actually purchased just one “B” share with the Loyal3 brokerage service, so technically the amount I invested is immaterial to my net worth. I am a big fan of Warren, and have learned a tremendous amount from his teachings on how to view stocks as ownership pieces of real tangible businesses, not just some abstract concept to speculate on. Incidentally, I have found specific evidence that he is a closet dividend investor, as he is focusing on extracting and deploying excess cashflows from companies he owns into more income generating businesses.

I believe that the Berkshire Hathaway that Warren built from the remains of the old textile mill is a collection of high quality businesses run by good managers. I believe that Berkshire will endure for decades after Warren stops running it. It is very likely that it would be able to at least match the returns of the S&P 500 over the next few decades. However, I would never put a material portion of my portfolio in Berkshire Hathaway. The main appeal behind the company for me would be the man itself, Warren Buffett. Unfortunately, I am not so sure that he would be around for the next 30 years, which is my long-term investing horizon. In addition to that, Berkshire does not pay a dividend, although it might initiate it once the Gates Foundation receives most of it.

That being said, I am writing this post in order to alleviate any potential concerns that I am all of a sudden switching strategies. I am not, and this one share of Berkshire Hathaway is as inconsequential as the silver coin collection that my grandfather gave me several years ago, or the 40 or so euro’s I have left after my trip to Europe last summer. I am also typing this up, because I am slowly trying to be more open on this site, by posting things like recent personal investments for example and my dividend portfolio holdings.

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